The regulator has formalized the framework for restructuring of leadership, reporting lines and governance responsibilities across market infrastructure institutions (MIIs) such as stock exchanges, clearing corporations and depositories.
The Securities and Exchange Board of India, in a circular issued on Friday, laid out the roles and responsibilities of the managing director, the directorships of the MD in other companies, and the appointment, roles and responsibilities of executive directors, chief technology officers and chief information security officers of MIIs.
MIIs must appoint two executive directors – one to head critical operations and the other responsible for regulatory, compliance, risk management and investor grievance functions. Both EDs will sit on the governing board of the MII.
Their appointments will be made through advertisements in all editions of at least one national daily. MIIs must forward at least two candidates for each post to Sebi, along with their proposed compensation packages.
The terms of compensation may not be altered without prior board approval. MIIs must also initiate the appointment process at least two months before an incumbent ED’s term ends.
Public interest directors will oversee the annual performance assessments of the EDs and Sebi may grant temporary exemptions to MIIs facing genuine operational challenges.
Sebi has laid out a detailed reporting structure. Both EDs will report to the managing director of the MII. The standing committee on technology will meet the ED responsible for critical operations every quarter, without the presence of the MD or other executives, and submit an independent performance assessment to the nomination and remuneration committee.
Quarterly updates
The regulatory oversight committee and the risk management committee will meet the ED overseeing regulatory and risk functions on the same terms. EDs must also provide quarterly updates to the governing board and may escalate matters directly to Sebi when necessary.
The reporting lines of key managerial personnel have been restructured. All department heads within the two verticals, including the CTO, CISO, compliance officer and chief risk officer, will now report to their respective EDs rather than the MD. Statutory committees will continue to meet these KMPs independently at least once a quarter.
For smooth implementation, MIIs have been asked to appoint the first ED within six months of the amendments taking effect, and the second within nine months. The new reporting structures will apply from the date of the appointments of the executives, while provisions related to the chief risk officer will come into force 60 days from the issuance of the circular.
The revised provisions were approved by the Sebi board on 12 September and are set to come into effect on 20 December.
